Journal: China May Demand Physical Gold

Gold could be about to get disorderly also as it approaches the key $1200 call option strike. The strong rumour is the large $1200oz Dec call owner is the Peoples Bank of China. Gold traders increasingly believe that China will force physical delivery of 2.8moz of gold instead of the usual cash settlement. My contacts suggest short-term mayhem may be about to break out in gold for a few days as those who have sold the call and get exercised scramble to buy physical for delivery. To put this in context 2.8moz is around 80 tonnes of gold. Yes, it’s that big and you can see why there is short-covering everywhere in gold.

Phi Beta Iota: If John Mack becomes Secretary of the Treasury, we anticipate China having a subtle but respected influence on the US Treasury as a condition for selective cover-ups, and China managing the situation so it ultimately gets compensation for all the gold stolen by Japen and confiscated by the US to create the Treasury Black Eagle Trust and Golden Lily slush funds. China did NOT sign the San Francisco Treaty and is on solid ground. We respect John Mack, he might possibly be the first truly multinational Secretary of the Treasury, and if he can make a commitment to Open Money and Real Wealth as a future path for the global economy, he could conceivably be the single most important person in the 21st Century. For background see

Over past years, we at Euro Pacific have taken an increasingly jaundiced view of paper currencies and written repeatedly about gold as an alternative. Along the way, we have urged investors to consider both the security and physical accessibility of their gold investments, and have advocated for at least some holdings to be in physical form. There are those who may have felt our views were overly cautious, even alarmist. Now, however, it is increasingly clear that major investors, including even central banks, are following our advice. Meanwhile, we continue to set the curve by calling for an even greater share of investors’ portfolios to be in physical bullion or secure equivalents.

Only China has shown growth in consumer demand up 12% from the same time last year to 120.2 metric tons for wider consumption and 8% for jewelry to 93.5 metric tons spurred by government urgings to invest in physical gold and the 60th anniversary of the founding of the People’s Republic of China on October 1 providing a boost to sales.

Of course, people with brains above the idiot level are acutely aware of the real world—credit continues to contract and foreclosures continue up while employment, real estate values and consumer spending go down.All of this spells depression/recession–even though overall inflation continues in the economy.Thus, we are in an inflationary depression . . . . . . . While no official statements were ever forthcoming on what Obama promised the Chinese, we can be sure that some type of payoff or bribe was promised (at a minimum, new missile technology).But whatever the Chinese got from Clinton in Feb, it was not enough; so Chinese apprehension continued.By June, Cabal agent and relative Geithner was dispatched to Beijing to further calm the Chinese.At Beijing University, he was laughed off the stage.Soon, Beijing put together a task force to go to Washington and make some demands that more assurances be given the Chinese over the status of the US dollar.

I will argue that this year’s rally in inflationary assets, from emerging stock markets to industrial commodities to the fall in the US dollar, could be a FAKE. Let me explain why. . . . . .

…it is our contention that US savings are heading north over the months and years to come. And an America that saves is an America that does not run a current account deficit. It is an American that can finance its own spending domestically. The US produced a small surplus back in the 1990-91 recession, so why not again?

The Chinese are building capacity to meet a world where US nominal GDP is $25trn in ten years time. I fear they could be in for a nasty shock.

And with it the ominous precedent of 1931, outlined in our February report, when a back up in ten year Treasury yields from 3.1% to 4.4% undoubtedly accelerated the rate of deflation in the US economy.

Phi Beta Iota: We had to read this last one three times and still only understood less than a third of it. Our take-aways: 1) major deflation is coming; 2) China is facing its own crash with or without our gold; 3) capitalism based on the one billion rich is dead in the water and sinking fast. The good news: read our review of just a few books, below, which we summarize in one sentence: We can create a prosperous world at peace by focusing on the five billion poor and their four trillion a year economy–we do this with free cell phone connectivity, call centers, and education “one cell call at a time.” It’s time for non-zero win-win.